News

Scent Of VAT

DQI Bureau

07 Jun 2005 00:00 IST

New Update

On an easy pitch, most score. Take accounting software, for example, which is

one of the easiest to write. There are countless players, many of them regional.

There is a shining new ball now to score off even faster: Value Added Tax (VAT).

The latest to jump into the fray, citing this self-policing regime with heavy

penalization on non-compliance as the reason, is Source Code International. It

has launched "Balance," a trading-inventory-accounting software, which

is not only VAT compliant but also "VAT intelligent."

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Just why is the new taxation regime so exciting? In all probability, the VAT

scenario in India could only succeed if the country as a whole embraces VAT, not

just 20 states. But by conservative estimates, there are 8 mn small

establishments in India, predominantly trading. These are the people who would

be affected by changing tax statute or standards. Essential to the VAT ecosystem

are tools of transition from the sales tax regime. It is here that accounting

software companies sniff growth and are expected to play an important role.

Source Code International's “Balance” is a trading-inventory-accounting software, which is not only VAT compliant, the company claims, but also “VAT intelligent.”

CEO of Source Code International, Niraj Jaipuria, who launched Balance in

Karnataka, forwards these arguments: the Commercial Taxes office in Bangalore

has approximately 3 lakh registered traders; the Indian ERP software market size

is estimated at Rs 4,000 crore and 10-15% of this is from the SMB sector

currently. This percentage is expected to grow to 50% by 2008. He further

estimates the nation-wide market size for VAT-related software to be about Rs

200-300 crore, but this looks a fairly modest estimate when considering just

Tally's growth. It closed FY05 with a turnover of over Rs 300 crore-compared

to 100 crore in FY04. Most of the growth came in the last two-three months of

the year-much of it because of VAT. The company's annual revenue target by

the end of FY06 is now in the range of Rs 3,000 crore and VAT would be

substantially leveraged if it is to achieve that.

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Helping

hand

How

exactly will VAT-compliant accounting software help?

-

Someone operating a business needs to submit a set of

reports relating to the input and the output VAT so that

he can set off VAT and provide the government with a

series of information on the transactions undertaken.

-

This requires capture of all the information by

category, by the format in which a particular state

government wants. So it requires time and effort by any

business entity to merely perform the compliance norms

-

With a solution like Tally 7.2 or Balance, someone

operating from Karnataka, for example, just needs to

inform where he is operating from at the time of set up

and indicate the goods he deals in.

-

The category and tax rates are then available for that

state.

-

Thereafter, all he needs to do is capture his inputs in

terms of purchases and outputs in terms of invoices

correctly.

-

Once done, the VAT report for the state-specific returns

are generated by the system.

What we should not lose sight of is the fact that too many players are

running after the same ball. Scoring will therefore be difficult. India is not

the first country to embark on a VAT implementation program. So players in the

accounting software market operating in such geographies-like Tata EX, for

example-also have VAT-compliant solutions. What many don't have is the

convenience of printing state-specific statutory VAT reports. It is here that

Tally and Source Code wish to gain. Others are catching up though. Tata EX, we

learn, is working with Mumbai-based Compusoft to introduce configuration changes

and state-specific reporting modules. In such a scenario, pricing could be the

key. Source Code here has made the right start, pricing the single-user version

at Rs 1,300 less than Tally 7.2's tag of Rs 6,300. What it will be up against

is Tally's huge fleet of resellers.

Goutam Das

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